Look Down Under for Murdoch’s next move – FT.com
The Australian TV holdings are worth $2bn, and News Corp has just bid $2bn for James Packer’s Consolidated Media Holdings to double its stakes. The CMH bid looks like a move to give the newspapers a cash cushion, and represents a $2bn transfer from head office, even before it decides how much cash to put into the spin-off. The new company will also hold a near-$1bn stake in Realestate.com.au, a property website. These $5bn of pay-TV and online assets will loom large, as Morgan Stanley and Deutsche Bank values the publishing assets at between $4.3bn and $5.3bn.
Commonwealth Bank notes that even before TV and online stakes, newspapers make up just 39 per cent of publishing earnings this year, with the rest coming from News America Marketing and HarperCollins books. Australia contributes 70 per cent of the newspaper profits. One thing seems clear: valuing News Corp’s publishing company using the multiples that US newspaper groups such as McClatchy or the New York Times trade at, as some analysts are doing, seems woefully inadequate if Australian TV and online assets represent half of its value. Why, then, would Mr Murdoch underplay those assets? Any spin-off poses risks for a family owner looking to keep control. Investors’ dislike of newspapers could make the publishing company “the short from hell”, the Australian Financial Review remarked.
Alan Gould, an Evercore analyst, has noted that conspiracy theorists might think Mr Murdoch could put his own money on the other side of that trade, buying publishing shares that those less fond of newspapers want to dump and locking in family control for generations.